I'm not the only one who thinks Apple (Nasdaq: AAPL ) has the best supply chain in the world. Market researcher Gartner has released its 2012 Supply Chain Top 25, with Apple standing pat in its No. 1 spot.
Amazon.com (Nasdaq: AMZN ) has been steadily rising and was able to score the No. 2 spot this year, while McDonald's (NYSE: MCD ) landed in No. 3. Here are the top five along with some other notable mentions.
3-Yr. Weighted ROA
3-Yr. Weighted Revenue Growth
|19||Research In Motion||17%||11.3||13.3%|
|22||Johnson & Johnson||10.7%||3.2||2.1%|
A couple quick points on how Gartner comes up with its ranking. It uses a composite score that's based on peer and Gartner analyst opinions along with the financial metrics listed. The three-year weighted metrics put more weight on more recent years relative to older years. So while there's a subjective component to these rankings from the opinion, Apple's composite score was still 79% higher than runner-up Amazon's.
Gartner analyst Debra Hofman said that companies began reinvesting in resources and assets last year, which was a positive sign for the economic recovery. This year has seen the same trend strengthen, and companies are positioning themselves for future growth. There have certainly been some speed bumps along the way, but for the most part, companies have seen profits continue to grow.
Apple's integration goes beyond its hardware/software and focus on user interface. The Mac maker demonstrated "mastery in orchestrating its end-to-end value network." Of the financial metrics, it has the second highest weighted return on assets (behind apparel maker H&M), second highest inventory turnover (behind Mickey D's), and highest revenue growth.
I find the inventory turnover metric particularly interesting. Apple's 74.1 was behind the Golden Arches' 142.4, but that's a company that sells McFlurries and McNuggets by the boatload, while Apple sells high-priced consumer electronics. Behind Apple on inventory turnover was Dell, which should come as no surprise since Dell was the pioneer of the build-to-order model that quickly proliferated throughout the PC industry. Apple CEO Tim Cook's belief that inventory is evil is largely responsible for its unparalleled inventory efficiency.
Gartner notes three areas where the best performers focused: resiliency, simplification, and "multilocal" operations.
Natural disasters happen, and being able to pop back quickly is a veritable strength. For example, the Thai floods last year crippled much of the PC industry. Hofman said that companies like Intel and P&G bolstered multitier supply chain visibility to remain nimble when disruptions arise. She said, "Overall, leaders have remained focused throughout the past year on building resiliency into their global supply chains, and we see it continuing to be a highly valued supply chain characteristic."
Getting rid of unpopular and unprofitable products (aka, reducing product breadth) also allows companies to see efficiencies and simplifies the overall supply chain. Getting rid of unnecessary layers of the supply chain that don't add value helps reduce costs and slim down operations.
The top companies are also turning toward regional "multilocal" operational models instead of a global centralized approach. This balances economies of scale with responsiveness.
Didn't I tell you Apple had the best supply chain in the world?
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